2019 is shaping up to be a challenging year for the restaurant industry. For many restaurants, last year was marked by weak customer traffic and stagnant sales. Rising food and labor costs, as well as changing customer demands, indicated this year isn’t going to be much easier.
It’s not all bad news, though. Restaurant stocks are doing better than the broader market. Plus, as President Trump’s tax cut starts to reach customers they’ll have more money to spend at restaurants.
Even though there’s some good news, you’ll still want to be ready for the struggles facing restaurants in the new year. Keep reading to learn about four big challenges restaurants should prepare for in the year ahead.
Optimizing Delivery and Packaging
More and more Americans want take-out options or food delivered right to their door. That means extra work and planning for restaurants. It can also involve costly technology investments.
Restaurants who want to offer delivery need a way to get food to customers quickly and without losing any of the quality. For some, this means investing in new product packaging to keep food warm but also well-ventilated so things like fries or pancakes don’t get soggy. For others, it means investing in more catering vans or partnering with a food delivery service like Uber Eats or GrubHub Inc.
Leveraging Customer Data
Online, take-out, and delivery orders result in a wealth of customer data. Leveraging this data is key to crafting marketing initiatives that bring customers back for more food.
Unfortunately, it’s not always easy for restaurants to access this data. Restaurants that partner with a third-party delivery service might find themselves in a battle with their delivery company over who owns this information. To get around this, Pizza Hut owner Yum! Brands Inc. invested in GrubHub last year so they have access to data from both their restaurants and the delivery service.
Dealing With Food Inflation
The time of cashing-in on inexpensive food ingredients may be drawing to a close. Bob Derrington, an analyst at Telsey Advisory Group, estimates that average food costs in 2019 could go up about 5.4 percent. There’s an especially good chance that beef, chicken, and cheese will be more expensive.
It’s tempting to raise prices to cover the increasing costs of food, but restaurants have to be careful of that too. Bob Goldin, a partner at food-service consultant Pentallect Inc, says that “Restaurant pricing is starting to be an inhibitor to the industry for growth.” You don’t want to lose money on your food, but you also don’t want to drive customers away with rising prices. It’s a difficult balance.
Working With Labor Inflation
Unemployment is low, which means restaurants have to work harder to attract employees. Higher wages, minimum-pay hikes, and investments in employee benefits all put added financial pressure on restaurants.
Some companies deal with the labor shortage by offering bonuses or freebies to attract workers. Others are making things easier for kitchen staff so they can get by with a smaller group of workers. The approach you take is going to depend on the specific demands of your restaurant.
If you found this article useful, then you might also like my books City On A Hill and The Devil’s In The Details. Click on the titles below to learn more.